Insurance Industry

Part
01
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Part
01

Insurance Industry: Part 1

Apart from Insurance, there are other industries that invest on Artificial Intelligence and Machine Learning technology. These industries include Consumer Packaged Goods, High Technology, Travel, and Transport. Investments on AI/ML by insurance companies has gone up five times higher compared to the investments in 2000. Some specific examples where AI/ML is being applied by insurance companies are: Fukoku Mutual Life Insurance which uses artificial intelligence for claim processing and settlement and Chola Ms which applies Machine Learning to speed up the process of settling claims and also prevent cases of insurance fraud. Below is a deep dive into the clarifications of the original response.

"INVESTMENTS IN AI/ML AND RELATED TECHNOLOGIES HAVE INCREASED MORE THAN FIVE-FOLD"

This means that artificial intelligence and automation technologies such as robotic processing automation are highly demanded by the insurance sector. According to a Stanford University study, investment by the insurance sector on artificial intelligence has increased more than five-fold today compared to 2000. This means that now insurance companies have started investing five times more on artificial intelligence based technology as compared to 2000.

WHAT OTHER INDUSTRIES ARE INVESTING ON AI/ML APART FROM INSURANCE

The 2017 Global Trends study revealed that the insurance industry invests an average of $124 million per company in AI. This means that the insurance industry alone invests $54 million more than the average across all other industries. According to the TCS' Global Trend Study on Artificial Intelligence, which studied how 13 different industries are spending on artificial intelligence, the average spending for the other 12 industries was $70 million. The top 3 industries in terms of investment on AI were insurance, consumer packaged goods and high technology sector. According to the study, the other industries that invested on AI/ML are Consumer Packaged Goods, High Technology, Travel, Transport and Hospitality, Automotive, Banking, Energy, Healthcare, Industrial Manufacturing, Media, Retail, Telecommunications, and Utilities.

SPECIFIC EXAMPLES ON MI/AL APPLICATION IN INSURANCE COMPANIES

According to Insurance Innovation Reporter, Machine learning is critical in insurance because it enables insurers to "take observations and findings from claims audits" which are later used in investigating, evaluating, and settling claims. ML helps insurers to reduce the leakage of claims and also prevents over payment. The following are examples of insurance companies using artificial intelligent and machine learning:
FUKOKU MUTUAL LIFE INSURANCE
This Japanese insurance company applies Artificial Intelligence for its claim processing and settlement. With a "cognitive AI technology that replicates human thinking", the company can analyze and interpret their data. The technology was used to process claims, underwriting, and detecting fraud.
CHOLA MS
This insurance company uses Machine Learning algorithms so that they can tap into unstructured and semi-structured data (claims notes and documents) as well as structured data to identify potential fraud. The company has used this technology for its claims survey process. Machine Learning has helped them to settle claims faster, increase the productivity of surveyors, and prevent fraud.

What does it mean to utilize phone apps and automotive systems?

P&C carriers means Property and Casualty Insurance companies. These companies are using phone applications and automotive systems that automate relevant information to help them close claims instantly after they occur. This is explained in detail with the help of an example mentioned below.
Suppose an accident occurred in a remote area. There is a sensor along with the dashboard camera already attached in the insured car that met an accident. Due to this, the insurer is automatically alerted about the accident. Since the insurer is already aware of the accident in real-time an insurance personnel can instantly begin to assist the driver and passengers.
Thus, they can assess the scope of the damages via the dashboard camera and information from the driver’s mobile. Moreover, the insurer can also dispatch a drone to take aerial photographs of the accident, the landscape and the weather conditions. Thus, the applications and technologies are used by the insurer to get crucial information in real-time for automating and claims can be closed shortly after accidents.

other examples where adopting future technologies has enabled a reduction in home insurance premiums

NEST
Nest has partnered with the American insurance company, American Family Inc. Nest offers Nest Protect smoke detector that offers a monthly discount for homes that link their Nest smoke detectors to the insurance firm. American Family is the first insurer which was running the program in the state of Minnesota. The insurer sends the customer the Protect (which costs $99) at no cost, and the customer hooks the Protect up via the ‘Works with Nest’ program. That will enable Nest to share some data with the insurance firm so it knows if the customer’s house has working smoke detectors. If a customer installs these products, they receive a discount of up to 5% on their insurance premiums.
WATER HERO
This is a sensor that is used to detect and turn off the water supply before the slow escape of water accumulates over time. The digital sensor provide real-time proactive alerts around home. Water flow in the home can be monitored continuously by connecting a sensor to the water pipes. As a result, a customer and Insurer are alerted in case of a leakage to take proactive action. Given that one third of all household insurance claims are linked to water leaks, this is a "big incentive for insurers to act." Thus, insurance companies are likely to charge lesser premiums from customers.


Part
02
of two
Part
02

Insurance Industry: Part 2

Applications of telematics outside of car insurance sector include — home insurance, P&C insurance, and health insurance. Kespry drones help some of the largest insurance companies by carrying out preventative maintenance inspections. Farmers Insurance and Liberty Mutual use drones to inspect home rooftops for risk and damage assessment. Concerns regarding privacy and regulatory policy present a negative response for drone usage in the insurance industry.

METHODOLOGY

We started our research by studying the original response of the 'Insurance Industry-Trends 2' as this project required some additional clarification on the applications of telematics and drones in the insurance industry. Next, we expanded the search by looking for examples on risk assessment for an insurance policy and preventative maintenance for an insurance company. We found relevant findings from credible sites like UBI Telematik, Value Penguin, Property Casualty 360, Duck Creek Technologies, IEEE, General Aviation News, and Drone Life.
Further, we tried to check for information on any negative response from the industry or consumers towards the use of drones in sources like Space City Drones, Argo Group, and AIR Worldwide. The detailed presentation of our findings can be found below.

Applications of telematics outside of car insurance

Telematics technological products are changing products, pricing, claims, services, and other aspects of the industry. Technology and data insights offer a great opportunity to personalize the customer experience. Applications of telematics outside of car insurance include — home insurance, P&C insurance, and health insurance.
Some examples of telematics being used in home insurance include phone operated closure of a garage door, smart thermometers to monitor the house temperatures and prevent the pipes from bursting, and telematics smoke alarm that can alert the local fire department within seconds of detecting a fire in the house.

In health and life insurance sector, the telematics data generated from wearable devices are used to reduce a potential health risk for the consumer or to adjust the pricing for policyholders who exhibit healthier lifestyles. Telematics is also considered as an essential tool in the evolution of the P&C insurance industry.

Examples of drones to calculate the risk for an insurance policy

Drones are used as a technological tool across many stages of the insurance life cycle; this may include calculation of risk before issuing a policy, aiding in preventative maintenance, and assessing damage following a loss.
EXAMPLE 1: Farmers Insurance uses Kespry drones to aid risk and damage assessment of homes. The drones transmit data to the central cloud storage for analysis. Kespry drones can carry out roof inspections and damage assessments to calculate the risk of property insurance before issuing a policy.
EXAMPLE 2: Liberty Mutual uses drones to do bird’s-eye inspections of the rooftops to damaged homes. The insurance company claims that drones help them to perform property inspection with risk control and access pre-loss and post-loss claims. The drone's ability to take detailed aerial imagery helps the company to analyze claim adjustments and study the catastrophe model validation program.

Examples of drones to carry out preventative maintenance for an insurance company

Drones serve as an insurance technology tool that is currently being used to aid the insurance companies to carry out preventative maintenance work; some examples include the use of DJI Phantom 4 and Kespry drones for preventive maintenance.

EXAMPLE 1: DJI Phantom 4 is a part of a preventative maintenance program launched by Fortress UAV, a provider of drone repair services. The drone provides preventative maintenance services to help customers mitigate and reduce the risk of accidents and crashes. The drone is currently being used under Accidental Insurance Program by the company.
EXAMPLE 2: Kespry drones are used by the largest insurance companies in the US to quickly resolve residential and commercial roof claims in as little as an hour. Kespry helps to reduce policy risk by carrying out preventative maintenance inspections and improve the overall underwriting process.

Industry/consumer concerns over the insurance industry’s growing use of drones

Drones are being used on a small-scale to collect property information in the P&C insurance industry. Current regulations and technological capabilities of the drones does not permit large-scale data collection of property information for precise risk management. On the technology front, the industry requires longer flight time and autonomous flight capabilities in a drone for large-scale assessments. Whereas, on the regulatory side, the ambiguous nature of property and privacy laws for drones has resulted in concerned property owners disliking the use of drones. Alternatively, the Federal Aviation Administration (FAA) prohibits the use of UAVs for post-catastrophe emergency operations. Thus, drones are not considered as a useful tool in a major emergency or accidental use cases.

Consumers have also shown concern for privacy with the usage of drones; this is because almost all inspection drones are equipped with cameras. Additionally, there is a growing concern among the consumers about the cyber liability issues associated with the use of drones, because drones can capture and transmit the data to the company cloud without notifying the consumer. Thus, loss of privacy gives a negative push back to the consumers.
Sources
Sources

From Part 01
Quotes
  • "Today, artificial intelligence (AI) and automation technologies such as robotic processing automation (RPA) are the darlings of investors and businesses alike."
  • "AI investments have increased more than five-fold since 2000, according to a Stanford University study, and International Data Corporation reports a 54.2% boost in spending from 2017 to 2018. "
  • "Significantly, insurers are leading the charge"
Quotes
  • "Only 15% of enterprises are using AI as of today, but 31% are expected to add it over the coming 12 months, according to Adobe."
  • "The number of active startups has increased by 1400% since 2000, per Stanford University"
  • "Investment into AI startups by venture capitalists has soared sixfold since 2000, per Adobe. The share of jobs requiring AI has increased by 450% since 2013, per Adobe."
  • "For enterprises using AI, top-performing companies said they are more than twice as likely as their industry counterparts to use the technology for marketing, 28% vs. 12%, per Stanford."
Quotes
  • "The insurance industry outspent the other twelve verticals surveyed, investing on average $124 million in AI systems, compared to a cross-industry average of $70 million"
  • " Consumer packaged goods reported the second most significant spend at $95 million"
Quotes
  • "Fukoku Mutual Life Insurance, for one, has already laid off 34 employees and replaced them with an AI system that can calculate payouts to policyholders."
  • "AI is tailor-made for the insurance industry because, as Adam Devine notes on VentureBeat, ‘adoption of AI and automation will be highest in regulated industries and those that must process thousands of transactions and customer requests daily."
  • "The insurance sector is not traditionally ahead of the curve when it comes to new technologies. In a recent survey by Willis Towers Watson (WLTW), 58% of senior executives in the sector acknowledged that they lag behind other financial services sectors in terms of technology adoption - with digital technology a particular problem"
Quotes
  • "Machine learning enables insurers to take observations and findings from claims audits, pull those insights upstream and insert them into critical stages of the claims process, including investigation, evaluation and settlement"
Quotes
  • "Machine learning algorithms are superior to traditional predictive models for this application because they can tap into unstructured and semi-structured data such as claims notes and documents as well as structured data, to identify potential fraud"
  • "Chola MS, one of India’s fastest-growing insurance companies, has adopted mobile technology for its claims survey process"
  • "The company’s vehicle surveyor application uses the voice, camera and data connectivity capabilities of the Samsung Galaxy Tablet to capture and store auto survey data in one database"
  • "In the past, loss adjusters had to manually match survey notes with e-mail and photos saved in other databases before making a decision on a claim. This initiative helped to speed up the claims settlement process, increased surveyor productivity and improved fraud prevention."
Quotes
  • "A vehicular accident occurs in a remote area. Based on sensors in the insured’s car and the dashboard camera, the insurer is automatically alerted about the collision"
  • "Because the insurer knows about the event in real-time, personnel can instantly begin to assist the driver and passengers."
  • "Next, they start assessing the scope of the damages and determining culpability via the dashboard camera, information from the driver’s cellphone, etc. Due to the remoteness of the area, the insurer can also dispatch a drone to take aerial photographs of the accident, the landscape and the surrounding area/ weather conditions"
Quotes
  • "Nest recently announced partnerships with two of the largest American insurance companies, American Family Inc. and Liberty Mutual, through which Nest provides further savings to its users"
  • "Nest can be provided to consumers for little to no cost and receive a discount of up to 5% on their insurance premiums [3]. These savings are ultimately passed from the insurers to the customers. Because the consumer provides insurance companies with the in-home data gathered by the Nest devices, insurers typically give the device to consumers at no cost."
Quotes
  • "Digital sensors around the home provide real-time proactive alerts. Instead of waiting for the ceiling to fall down, a sensor like a Water Hero can detect and turn off the water supply before the slow escape of water builds up over a period of time. By connecting a sensor to the home’s water pipes, flow can be monitored continuously. As soon as an anomaly in flow rates is identified, the customer and/or insurer is alerted to take proactive action."
  • "When you consider that about a third of household insurance claims are linked to water leaks, this is a big incentive for insurers to act. And whilst it won’t stop every incident, it will minimise and even prevent a lot of them. Which means that insurers have lower costs, customers have lower premiums and less hassle."
  • "It also signals a fundamental shift for insurance as more than just a financial safety net. The current model of (just) compensating losses will move towards insurance as a proactive risk manager."
From Part 02
Quotes
  • "Digital technology is transforming every aspect of the property and casualty (P&C) insurance industry. Telematics, the sharing economy, big data, digital communications platforms, and an ever-changing competitive landscape have shifted the focus from products and process to a personalized customer experience."
  • "Telematics, mobile apps, self-service, drones, and other advancements are changing products, pricing, claims, services, and other aspects of the industry for the better"
  • "Usage-based insurance (UBI) programs that use telematics are seen as essential in the evolution of P&C insurance to be more personalized and cost effective. There are numerous benefits to consumers in the form of lower premiums and frictionless services, as well as to companies with more precise data and risk mitigation"
Quotes
  • "Telematic devices can improve this exchange of information and insurance for both parties involved. By installing telematics in your home, you can get an update to your phone if you leave your garage door open"
  • "Smart thermometers can monitor temperatures in your house to prevent your pipes from bursting while you're on vacation, and a telematic smoke alarm can alert your local fire department within seconds of detecting a fire."
Quotes
  • "In health and life insurance, the use of data from wearable devices can reduce risk and adjust pricing for policyholders who exhibit healthier or more active lifestyles"
  • " In automotive insurance, the growing adoption of vehicular telematics extends beyond commercial fleets into personal auto, with either mobile-enabled tracking devices or purpose-built smart phone apps identifying unsafe vehicle performance or risky driving behavior, often with the help of sophisticated machine learning techniques."
  • "Smart home programs represent the next frontier for telematics. Beyond technology as the evident enabler of this forward momentum, the rapid adoption of connected devices in the typical American home paired with the open approach homeowners have toward data sharing are creating alignment for improved and novel insurance services."
Quotes
  • "Insurers are taking to the sky, or at least their drones are. Unmanned drones are an insurance technology tool that will be utilized more by carriers in 2019. They can be used across many stages of the insurance lifeycle – collecting data to calculate risk before issuing a policy, aiding in preventative maintenance, and assessing damage following a loss."
  • "Farmers insurance is a great example, as they deploy Kespry drones to aid risk and damage assessment on homes. These drones perform roof inspections and other assessments, and the drones transmit their data to the cloud for analysis."
Quotes
  • "Liberty Mutual has started using drones remotely controlled by a claims representative to do bird’s-eye inspections of the rooftops to damaged homes. The insurance company said it uses UAVs because they are safer than using a ladder and sending someone up to a roof."
  • " The insurance company is using drones to aid in property inspection associated with risk control, pre-loss or the claims process after a loss. "
Quotes
  • "Fortress UAV, a provider of drone repair services, has announced the launch of Fortress UAV Protect – a new drone preventative maintenance program"
  • "Current drone models included in the maintenance program: DJI Mavic Pro, DJI Phantom 4, DJI Inspire 1, DJI Inspire 2, DJI Matrice 600 and DJI Matrice 200/210."
  • "With the preventative maintenance program, customers will help mitigate and reduce the risk of accidents and/or crashes, lessen costs by maximizing the lifespan of their drone assets, reduce the risk of liability should an accident and/or crash occur, ensure drones are flight-ready and have maximum uptime, and get a step ahead of any FAA mandated UAS maintenance reporting regulations"
Quotes
  • "Kespry is now leveraged by some of the largest insurance companies in the U.S. to resolve residential and commercial roof claims in as little as an hour. Kespry also reduces policy risk and drives preventative maintenance for commercial property inspections, while improving underwriting processes"